[The Editors' Verdict]A National Leader Blocking Corporate Investment

Investment is the foundation of sustained economic growth. This is why investment, along with exports and domestic demand, is considered a key factor when assessing contributions to economic growth rates. Recently, the Bank of Korea announced that the real GDP growth rate for the third quarter was only 0.1%. With the contribution of exports declining, the contributions of domestic demand and facility investment were 0.3 percentage points and 0.6 percentage points, respectively. If investment contraction had also occurred, expecting positive growth would have been difficult.

Investment must be handled cautiously because it is greatly influenced by psychological factors. Since investment inherently involves spending money while anticipating an uncertain future, it inevitably reacts sensitively to surrounding conditions. This is why efforts to eliminate various sources of anxiety are necessary. Corporations, a major pillar of the economy, are even more sensitive.

The focus on investment stems from the repercussions of President Yoon Seok-yeol’s declaration of martial law. After the martial law incident, companies held internal meetings to discuss countermeasures such as exchange rates and began to reconsider their investment plans for next year. The business community finds it even more incomprehensible because it caused investment contraction, which is primarily influenced by psychological factors.

Companies are revisiting their investments because uncertainty has increased. The martial law incident has raised the possibility of a regime change. The opposition party has submitted an impeachment motion against the president to the National Assembly and is pressuring him to resign. A senior executive of a major corporation said, "We are watching tensely, to the extent that we have to keep the presidential election mode in mind."

If the administration changes, priority projects will change as well. Energy projects such as nuclear power and solar power are clear examples. Nuclear power, which was neglected under the previous administration, is now receiving attention from the current government, while solar power has taken the opposite direction. There may be counterarguments questioning whether companies invest based on government preferences, but reflecting government policies is the reality for our companies.

Considering the scale of investment, the impact on our economy is expected to be significant. Next year, the investment scale of our companies will be at least tens of trillions of won. Even looking at announcements made by some companies this year, LG Group declared it will invest a total of 100 trillion won domestically over five years starting this year, and Hyundai Motor Group also plans to invest 63 trillion won over the next three years. Just the annual average investment expenditure planned by these two groups exceeds 40 trillion won. If tens of trillions of won in funds are left unused without serving as a catalyst for economic growth, it will be difficult to raise the growth rate next year.

Companies may also choose to expand overseas operations instead of domestic investment. Last year, the United States accounted for 43.7% of Korea’s overseas direct investment (ODI), marking the highest level since 1988. Companies leading Korea’s key industries such as semiconductors, batteries, and automobiles are expanding production bases in the U.S. Our companies are busy monitoring the moves of the new Donald Trump U.S. administration, which will take office next year, and since it has started pressuring with tariff increases, investment in the U.S. is even more necessary. Ammunition intended for domestic use may be spent overseas.

An official who served as Deputy Prime Minister for Economic Affairs in a past government evaluated the martial law repercussions caused by President Yoon, saying, "It is difficult to find a precedent for the adverse effects it caused throughout our society in such a short time." Political strife has intensified and policies have disappeared. Above all, it is serious that the national leader, who should prioritize livelihood issues, instead caused investment contraction and thus self-harmed our economy. The Korean economy, with a potential growth rate in the 1% range, is now at risk of losing its financial lifeline. What price will we have to pay for this?